Eagle Ford production to slide; EIA looks at the tax impact

Published 8:48 am, Monday, January 18, 2016

Oil production from the Eagle Ford Shale will dip again in February, according to a report from the U.S. Energy Information Administration.

Production of crude oil and the light oil condensate is expected to slide by about 72,000 barrels daily, to around 1.15 million barrels per day. It would be the 11th straight monthly drop for the Eagle Ford, the oil field that swoops from the border near Laredo to the College Station area.

The field peaked at 1.7 million daily barrels in March and will be producing 565,000 fewer daily barrels by next month, according to the EIA.

The industry has been hit hard by falling crude oil prices, with energy companies drilling and completing fewer wells. Oil prices were higher than $100 per barrel in the summer of 2014 but were trading around $30 Wednesday.

The Eagle Ford isn’t alone — production started slipping in the Bakken in North Dakota and eastern Montana in the summer, and in the Niobrara (in Colorado, Wyoming, Nebraska and Kansas) in May.

The Permian Basin in West Texas and eastern New Mexico, the largest overall crude producer in the United States, is the only major shale oil field with rising oil production. The Permian is expected to pump 2.04 million barrels of crude oil per day in February, up by about 5,000 barrels from this month.

Overall, U.S. shale fields will produce about 4.83 million barrels daily in February, down 116,000 barrels from this month. The Eagle Ford is making up the bulk of that decline.

The EIA this week also looked at how declining oil prices are hurting severance tax revenue in three oil-rich states, Texas, Alaska and North Dakota.

In North Dakota: “Despite oil production volumes remaining largely flat throughout 2015, total severance tax revenues fell from more than $3.5 billion in 2014 to $2 billion in 2015 as oil prices declined.” If revenue remains down, across-the-board cuts to state agency budgets are likely.

In Alaska: Severance tax revenue has fallen “further and faster” because the tax is based on net income, not on the value of the oil extracted. In 2015, Alaska “derived practically no revenue from this tax, versus more than $5 billion in 2012” The governor recently proposed a 6 percent state income tax and a reduction in payments that residents receive from Alaska’s Permanent Fund.

In Texas: Revenues from natural gas production were down 48 percent and oil production taxes were down 51 percent as of November. But because Texas’ economy is more diversified, it “can likely respond to the lower severance tax receipts without drastic changes to its enacted 2016 budget,” the EIA said.